The origin of the dispute was the collapse of two retail chains, Woolworths plc in 2008 and Ethel Austin in 2010. Both had gone into administration, with large-scale redundancies across all stores. The union representatives brought claims for a failure by the administrators to inform and consult collectively on the redundancies.

An employment tribunal applied the orthodox approach to section 188(1); that is, that each store was a separate establishment and collective consultation was only required if the number of redundancies proposed at any one store was 20 or more (see box "The legislation"). Staff in the larger stores received protective awards of 60 days' pay (Woolworths) or 90 days' pay (Ethel Austin), while those in the smaller stores received nothing.

The bombshell moment for employers came on appeal to the EAT, which held that section 188(1) should be brought into line with the Directive by simply deleting the words "at one establishment" from section 188(1). This meant that the 20 or more redundancies did not have to be at the same establishment, but could be anywhere across the employer's business. At a stroke, the UK law on collective redundancy consultation was fundamentally rewritten, and millions of pounds were added to the protective awards in the two claims.

Following a reference by the Court of Appeal, the ECJ, however, has confirmed that both triggers for collective consultation under the Directive focus on the number of redundancies proposed at any one establishment. The Directive seeks to establish comparable protection for workers' rights in all EU member states. The EAT's interpretation of the second trigger would offend this principle by giving a choice of two completely different approaches: one focused on each separate establishment, the other on the whole business, with a huge difference in worker protection and costs to business.

The whole business approach would require collective consultation for a single redundancy at a remote establishment, if it happened to coincide with redundancies elsewhere in the business; a result that the ECJ rejected as outside the true scope and purpose of the Directive. So the UK limitation of 20 proposed redundancies in 90 days at the same establishment is legitimate under EU law.

The ECJ's ruling is definitive and the Court of Appeal cannot now uphold the whole business approach taken by the EAT. It must apply an establishment test and decide whether the employment tribunals were correct to treat each store as a separate establishment on the facts.

Had the result gone the other way, employers would have been faced with a collective consultation regime that required them to aggregate all proposed redundancies anywhere in their business in any 90 days. For large employers, the change could have meant that every single redundancy was subject to prior consultation with employee representatives and a possible 90-day protective award. Employers with workforces spread across many small sites, such as retailers, would have been particularly heavily affected. While the establishment approach insulates them from the duty to collectively consult in the case of 19 or fewer redundancies at any one site, the whole business approach would expose them to the full force of a fundamentally different framework.

At a practical level, employers were also faced with the difficulty of being able to predict with confidence the number of redundancies in any rolling 90-day period across their business. They might, for example, know of 15 planned redundancies and assume that no collective consultation was required. However, if another five proposals emerged on a similar timeframe, collective consultation could be unexpectedly triggered, putting the employer in an impossible position: it would have to either unravel the redundancy process already started in an effort to comply with section 188, or press on and face substantial financial penalties.

For some employers, those risks, and the huge challenge of centralised reporting and oversight of redundancy proposals, suggested that they would have to collectively consult as a matter of routine on any redundancy. But that also created practical issues, especially in non-unionised environments, as it required an information and consultation framework capable of coping efficiently with the increased burden of consultation and multiple simultaneous redundancy exercises of different scales, at different locations, for different business reasons and affecting different categories of employee.

The EAT's approach therefore gave employers a difficult choice. On the one hand, the increased costs, in-built delays and significant drains on management and HR time from over-compliance or, on the other hand, the risk of non-compliance and six or seven figure protective awards. By restoring the approach long established in UK law, the ECJ decision is not just a return to business as usual; for most employers, it is a return to sanity as well.

While employers may be breathing a sigh of relief, they cannot relax completely, as the question of whether an establishment can span more than one geographical site still remains. The ECJ's decision repeats previous EU case law by defining establishment as the unit to which the workers made redundant are assigned. This is not an exclusively geographical test, and EU and domestic cases have shown that it can include an organisational element that would allow an establishment to span more than one location (Athinaiki Chartopoiia AE v Panagiotidis and others C-270/05; Mills and Allen Ltd v Bulwich EAT/154/99, www.practicallaw.com/8-101-2300).

For businesses run on divisional, rather than geographical, lines there remains a risk that redundancies proposed within a division must be aggregated to determine whether there are 20 or more at the same establishment. Case law on this issue has yet to catch up with the complex organisational structures of modern businesses, and this may become a key focus in future litigation.